The challenges facing emergent NEDs - Barry Gamble 782x504

The challenges facing emergent NEDs(Non-Executive Directors) – and the boards who plan to appoint them

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Louise Chaplin, Head of Board Practice at Eton Bridge Partners, offers some fascinating insights from a conversation with Barry Gamble. Barry is Chairman of LightwaveRF and has broad executive, leadership and NED experience.

The days are long gone when you would expect to find the board of a business to be composed entirely of men in suits. A greater degree of diversity in the leadership team of a 21st-century organisation should be seen as entirely normal.

The Hampton-Alexander Review (FTSE Women Leaders) is committed to achieving the 33% target set for women on Boards and in leadership teams of FTSE 350 companies by 2020.  Its latest report, in November 2018, showed that the number of women on FTSE 100 boards has exceeded 30% for the first time.

However, the total of female FTSE 350 Chairs remained flat at 22, while the number of women in CEO roles at those companies was only 12, down from 15 a year before.

One of the most effective methods of bringing about change on boards is the judicious appointment of Non-Executive Directors (NEDs). But what are the challenges facing a board when looking to reshape their Board Team. And what are the behaviours and attitudes that prospective NEDs should embody to ensure a meaningful impact on the organisation in question?

What is diversity?

Some companies believe that simply appointing women to their board allows them to say: “Well, we’ve ticked the diversity box.”

But diversity comes, appropriately enough, in many forms. Achieving a numerical balance between the sexes does not necessarily automatically deliver the level of diversity required on a board.

Diversity should also mean embracing different mindsets, skill sets, backgrounds and experiences. Yes, if you have people at the table who are less experienced, meetings will be harder work for the person chairing them; but surely that is a great challenge for a proven chair?

There are times when the apparently ‘ill-judged’ question can lead to real insight – clear minds can lead to a more thorough exploration of an issue in question facing the board. In short, a fresh board is more likely to think outside the box.

The desirability of diversirty

It has long been recognised that boards can go into inertia on decision making or a negative spiral if everyone thinks along the same lines and there are no constructive challenges to major decisions.

Avoiding group-think is much easier if the people around the top table come from a broad variety of backgrounds. This should include a mix in terms of expertise and mindset.

The big advantage NEDs can bring to the table is experience that the board would otherwise not have. Variety is the key here. Boards should want to appoint people from a range of backgrounds.

That mixture can represent a challenge to the person leading the board, but nobody should feel threatened by the task of heading a diverse leadership team. Ideally, they should see it as a refreshing change, a chance to embrace some new perspectives. However, in practice not everybody holds that view.

Striking the balance between innovation and experience

Far too often, business leaders want to recruit highly experienced Non- Executive Directors who can adapt seamlessly and be up and running operationally post day one.

The transition from executive to Non-Executive Director in most cases is very natural.  However, some aspects of a NED role are probably learnt skills, so it is vital that the Chair is there to support them in their development. Being a good listener as a basis for constructive challenges.

Barry’s message could not be clearer: You do not need to recruit the finished article every time – but Chairs, with their focus on sustaining momentum and achieving maximum results, can have a very clear idea of the sort of person they want to add to the executive team.

There should be a wider funnel of interested parties.

Where are the digital NEDs?

Nobody should need to be told of the importance of the digital dimension to modern businesses. This is clearly a skill set that needs to be embraced at the highest level. Yet there is a low level of good digital capability on boards.

For example, if a cyber-security issue arises your business could face massive market disruption and considerable reputational risk.

This issue was most clearly manifested recently at Boeing, which was revealed to have been unknowingly facilitating the Chinese army’s surveillance of its own people. You have to ask what was going on in that boardroom for that situation to arise.

NEDs’ role in future-proofing

If a board wants to recruit only the finished article when it brings in an NED, it is implicit that it does not see a need for training and development for its members.

There needs to be an atmosphere in which individuals can develop their skills and remain as relevant as possible to the changing challenges of modern business.

Boards should be looking to drive bench strength. You might have a very able person in the chair but there should be a process of succession planning. If there is an atmosphere in which discussions about skill sets, development and diversity are encouraged, that is a hugely positive step.

The challanges facing would-be NEDs

You have to be prepared to dedicate considerable time and effort to the process of finding your first NED role. You should draw up parameters on the types of organisation where you would fit in, taking into account factors such as scale, ownership, skills and geography. That way you will see what sort of organisation you wish to work with, and hone the way in which you present yourself. Defining your USP is key.

Talk to people who are on boards already. It is a very collaborative environment and the vast majority of existing directors and NEDs are happy to give their time to share their perspective of life on a board.

By definition, a NED is usually independent. Most non-execs are in a portfolio career, which creates opportunities for diverse thinking. Many individuals take their first non-exec role while they are still in a senior corporate position, which can be a good way to learn the ropes of the NED world.

It can be helpful for a NED to be part of a variety of boards, although any more than three to four may leave you over-stretched. But that variety can lead to added value and insight.

A board position is an opportunity for an individual to challenge the status quo, add value from an objective perspective and, importantly, bring to the table different skills, expertise and experience.

You are employed for ‘independent thinking’ but understanding your peer group on the Board and working as a team, will inevitably encourage a well-informed debate and ultimately a good commercial outcome for the business.